As economies slow, games turn profit for Sony

Sony Chairman and Chief Executive Nobuyuki Idei said Monday the company's game business has recently begun to turn a profit and, despite the economic woes facing many sectors of the IT business, is expected to continue for at least the rest of the financial year.

"So far, the Sony Computer Entertainment (Inc.) management believes there is no reason to revise our PlayStation 2 estimates," Idei told a briefing for foreign correspondents on Monday. He said the game business, which Sony entered in late 1994 with the launch of its PlayStation console, had begun to turn a profit in the last few months and that the company expected this to continue until at least the end of the current fiscal year, which runs until March 2002.

The prediction comes as Sony faces its first real competition in the sector for some time. After Sega Corp. stopped production of the Dreamcast console earlier this year, Sony's PlayStation 2 was pretty much the only game in town until Nintendo Co. Ltd. launched its Gamecube console in September. The Gamecube will be launched in the U.S. later this year as will the Xbox, Microsoft's first play in the console gaming sector.

To counter the new competition, Sony did cut the price of its PSone and PlayStation 2 consoles; however, the competition has been less fierce than expected.

Nintendo's introduction of the Gamecube was not as successful in Japan as had been expected, said Idei. However, he cautioned, "We cannot underestimate the power on Nintendo however." As for the Xbox, its Japan launch has been delayed until February next year which will help Sony, noted Idei.

Also helping Sony is the slump in the world semiconductor market.

"The semiconductor struggle is a favor for us," he said. "Cost reduction (for components) is much faster than expected."

Idei also said that the company was looking at a possible increase in business in the wake of the recent terrorist attacks in the U.S. as more people elected to stay at home. "We shouldn't overestimate the possible impact (of the attacks) on the family-orientated entertainment business," he said.

The company is sticking by its shipment estimates of 20 million units of PlayStation 2 and 10 million units of PSone for the current fiscal year. In the previous fiscal year, Sony shipped 9.2 million units of PlayStation 2 and 9.3 million units of PSone and PlayStation. Net sales were 660.9 billion yen (US$5.6 billion) and the unit posted an operating loss of 51.1 billion yen, largely as a result of startup costs associated with the PlayStation 2 console.

At Sony as a whole, the situation is not so rosy. Led largely by losses in its electronics business, the company revised down its current year fiscal estimates on Friday. Its net sales prediction was cut from 7.7 trillion yen to 7.5 trillion yen and net income forecast slashed from 70 billion yen to 10 billion yen.

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Martyn Williams

PC World
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